Are you ready for a new way to demonstrate the value of KM?
There is ongoing discussion about how you demonstrate value from KM activities – e.g. see this LinkedIn thread – but there is nothing new. The content is full of the same problems that have been discussed for decades, the same fuzzy responses, they fail to take into account the wider environment and they are blinkered, failing to see opportunities emerging in other areas of the business.
The problem is that KM continues to attempt to create its own language, its own justifications, its own case examples, its own problems. All the while the KM function is sitting in isolation, failing to sense disruptions in the environment that are producing currents that are fast forcing the function into a drift toward irrelevance.
In general, KM is guilty of the short-termism, the type of approach that is described in this month’s Harvard Business Review (Jan-Feb, 2014) as the problem with “quarterly capitalism.” The KM function is typically guided to respond to low hanging fruit, the quick wins and near-term return. One could argue that this is a product of the C-Suite, with their lack of understanding of what KM is and what it can achieve. I disagree, far too often KM, as a collective self, is guilty of narrow-thinking, a lack of business understanding and a reliance on the favour of others to sustain the function in the organisation. In the vast majority of cases the KM function fails to assert itself as a credible business partner, even though the signals that would allow this to happen are there for all to see.
The time has come for the KM function to grasp the nettle, to think different, to look at new ways to create value and, in doing so, drive a change in thinking when it comes to what KM actually is. The question is, how?
I implore you to think different and to begin the journey by exploring the International Integrated Reporting Framework (theIIRC.org). We (K3) have been working in this area, assisting elements of the CPA profession in the US to prepare for key changes created by this framework (e.g. the impact upon business valuation and attestation in areas of strategic management and business resilience). So, what is the big deal I hear you ask? People involved in the KM function should be thrilled to read that “‘value” in Integrated Reporting is attached to the following “Capital Drivers”: Social, HR and Intellectual Capital. So, what is this new approach to financial reporting? Quoting from the report:
* Promote a more cohesive and efficient approach to corporate reporting that draws on different reporting strands and communicates the full range of factors that materially affect the ability of an organization to create value over time* Enhance accountability and stewardship for the broad base of capitals (financial, manufactured, intellectual, human, social and relationship, and natural) and promote understanding of their interdependencies* Support integrated thinking, decision making and actions that focus on the creation of value over the short, medium and long term.
Integrated thinking takes into account the connectivity and inter-dependencies between the range of factors that affect an organization’s ability to create value over time, including:• The capitals that the organization uses or affects, and the critical inter-dependencies, including trade offs, between them• The capacity of the organization to respond to key stakeholders’ legitimate needs and interests• How the organization tailors its business model and strategy to respond to its external environment and the risks and opportunities it faces• The organization’s activities, performance (financial and other) and outcomes in terms of the capitals past, present and future.
Still not convinced, get ready for the words almost all KM functions have been waiting for – you’ll find this in the report under descriptors for the “Capital Value” drivers – this is the guidance on what constitutes Intellectual Capital (p. 12):
Intellectual capital – Organizational, knowledge-based intangibles, including:
o intellectual property, such as patents, copyrights, software, rights and licences
o “organizational capital” such as tacit knowledge, systems, procedures and protocols
As far as I can tell, I am one of the very few in KM speaking about this. The KM function has to realise that value is not just about the here and now, it is about the future and to discuss future value creation we cannot see it as an absolute, it is embedded in complexity – see the text of the report. This means KM has to look to influence the whole, as opposed to isolated tools/systems (think of KM existing solely to facilitate a Lessons Learned Information System), and that means an integrated function. What is therefore important is how firms mitigate risk and uncertainty, brought about by complexity in market environments, to show the potential to continue to create value, regardless of environmental changes. More than this, KM must demonstrate how it can lead contribute to value creation in this area – the signposts are there for all to see in the IR framework document and KM, as a collective, needs to open its eyes to the future.
There are rich conversations occurring on KM Agony Aunt boards, but the focus of advice for value creation remains far too insular. If KMers are truly going to discuss the value of the function, and its contribution to value creation, managers/leaders in the field need to learn the language of CFOs. KMers need to move to credible influence and to achieve this they must start considering the models/frameworks that are about to impact the profession.
This is an evidence-based response to the creation of KM value – we have to understand the “why” (why do we need to engage in KM) and the IIRC gives us a multitude of opportunities. Using this type of platform, KMers need to move to embed practice to the reporting output, thus proving a contribution to value.
Miss opportunities like this and the KM function will continue to swim upstream, tiring as it goes. Mind you, it could be worse, the KM function could awake from its slumber to find itself totally irrelevant! But, have no fear, that will never happen – just as Scribes were never under threat from moveable type.
* Just a note, IR is being led by the UK and a large number of notable UK organisations (government and public) were involved in the pilot. Finally, while IR is initially focused on public companies, it is already cascading, having been piloted in private and government organisations